In essence, Hong Kong would remain a democratic administrative region and would maintain governing and economic systems separate to the Chinese mainland. It was under these principles and treaty that the British agreed to concede the territory, however, that now seems under threat.
At the beginning of the month China introduced it’s new, highly controversial, security law across Hong Kong which was received with condemnation in the international diplomatic community.
Why is the law so controversial and why is it worrying governments and the people of Hong Kong? According to The BBC, “Lawyers and legal experts have said China’s national security law for Hong Kong will fundamentally change the territory’s legal system.
It introduces new crimes with severe penalties - up to life in prison - and allows mainland security personnel to legally operate in Hong Kong with impunity.”
Considering there have been ongoing protests for over a year now with regards to new laws about extradition powers, it’s come at a highly volatile time across the world, not least during the Coronavirus pandemic.
It’s been seen as a highly cynical move by the communist Chinese government whilst the international community is busy dealing with the Coronavirus pandemic, and has the potential to put people in prison for life for criticising the state, and means that the government can also confiscate property and funds from political enemies.
Since the announcement that the Chinese government now has powers to seize property and assets there’s been an outpouring of concern from the investment community and business leaders.
Where once Hong Kong was seen as one of the investment capitals of the world, there are now real worries that the government are placing irreversible barriers to a market where the city was a leading light and broadly accepted as the jewel in China’s crown.
The country has reportedly posted an impressive economic growth figure of 3.2% in the second quarter of the year despite Coronavirus shutting down large swathes of the country in January and February. How reliable those figures are is very much up for debate following global mistrust following the emergence of COVID-19 in the Wuhan province.
Given these concerns it isn’t difficult to see why there is anecdotal evidence emerging from Hong Kong that investment into property, and certainly prime real estate, has dropped significantly.
Many of the city’s properties are owned by foreign nationals who had enjoyed healthy returns, but that may soon be coming to an end, so where would this leave that capital inflow and where would it go?
Realistically, there aren’t a huge amount of options for investors looking for similar quality and returns, but it seems as though, judging by economic activity and reports from agents and property sellers that much of it may be coming to the UK, where activity has increased markedly since the lifting of lockdown restrictions.
With the UK recovery seemingly materialising quicker than expected, this may be the ideal time for property investors to ride the wave.